Better Time For Spinners With Range Bound Indian Cotton Prices

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Cotton Yarn Market To Pick Up

After a long time, spinners are having better time compared to the last few quarters. Yarn movement has improved, there is better price parity due to cheaper cotton available within India. Yarn demand is good, helping in a pick-up in the market. Mills are running with hand-to-mouth inventory except few big corporate mills. Mills are expecting that Indian cotton prices would be range bound so they are not in a hurry to build stocks like in earlier seasons. In regular season, most mills come into the market during peak arrival time (Dec-Jan) & buy best available cotton at cheapest price to build some inventory.

Cotton exports to Bangladesh, China
There is some export demand for Indian cotton from Bangladesh and China at the lower price. Indian exporters were able to sell decent volume during 15 Nov. to 10th of Dec. However, the volume is far from what we have witnessed in earlier regular seasons.

This week an appreciated Indian rupee and higher flat cotton prices again made export pricing expensive and no major export sales were reported for Indian cotton.

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Cotton arrivals pick up with some quality issues
Daily cotton arrivals have already crossed 200,000 bales, to approximately 220,000-230,000 bales per day which is a good number. Out of these arrivals, on daily basis, CCI is buying 50-60K bales (market talk), major volume comes from southern India. Prices are already trading below MSP across India. Indian flat prices are trading within range of INR 38400-39000 per candy ex ginning factory for good quality Shankar-6 cotton with general condition of 29mm/3.8-4.9mic/75+RD value/9.5% moisture condition. This year till now light to heavy yellow spots are getting reported in cotton bales with high moisture, which were not found in regular season during December – Jan period. Even now ginners are selling cotton with 9.5% moisture condition which was 9% in the  previous year. There are almost daily reports of pink boll worm infestations , but no statistical data is forthcoming for area or volume impacted. If the infestations continue or increase, it can damage quality of cotton, and reduce crop numbers by a small percentage.

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*U.S. Cotton Weekly Export Sales For The Weekend 05 Dec – USDA
Net sales of 277,100 RB for 2019/2020 were up 69% from the previous week and 9% from the prior 4-week average.

Top 4 buyers were reported:

  • Turkey 80,100 RB
  • Pakistan 61,300 RB
  • Vietnam 52,300 RB
  • Bangladesh 19,200 RB

Recently USDA – WASDE published its latest report which gave some bullish picture by reducing production numbers and ending stocks. However, the day market ignored the numbers, and traded without change. WASDE report updated some changes in Indian Cotton Balance Sheet – (170 Kg Bales)*:

USDA lowered Indian cotton production for 2018-19 from 339.20 lakh bales  to 330.20 lakh bales and decreased 2018-19 ending stock from 128.10 lakh bales to 119.20 lakh bales. USDA also lowered 2019-20 Indian cotton production from 384 lakh bales to 377.60 lakh bales with no change in Indian cotton consumption.

Cotton imports during 2019-20 is estimated at 28.20 lakh bales and cotton exports is estimated at 51.20 lakh bales. 2019-20 ending stock reduced from 169.10 lakh bales to 160.10 lakh bales (as on 31-July-2020).

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Recently ICE Futures rallied to five-month high as on 12th Dec. 2019. This rally can be cause of mixed results of below reports which the market ignored at the time:

  • WASDE gave quite bullish report
  • Good US weekly export sales
  • US/China trade talks more positive tweets

Hoping Indian prices should continue in narrow range until there is not a big move on ICE cotton or world’s demand supply. India is expecting bumper crop even after considering rain damages, pink bollworm issue till now. This season should be a better season for spinners and also for the whole textile value chain.

(Vimal Verma is a Cotton Trader)

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